European Gas Slides as Ample Supplies Counter Ukraine Risks

(Bloomberg) -- Natural gas in Europe declined for a sixth day, the longest streak this year, as milder weather forecasts and currently ample supply countered risks to Russian flows. 

Benchmark prices ended the week 8.8% lower as demand for heating dropped with the end of winter. Overall supplies to Europe are rising with near-record imports of liquefied natural gas.

The front-month gas contract dropped 0.7% to 103.88 euros a megawatt-hour on Friday. That’s near the level Goldman Sachs Group Inc. forecasts for this summer, which “is needed to sustain this combination of demand destruction and high European LNG imports,” the bank said in a note Friday.

Still, prices are more than five times higher than a year ago as concerns over Russian supply remain. Moscow’s forces and “illegal armed groups under their control” are disrupting operations at a major compressor station, key for about a third of gas that Ukraine transits to Europe, Gas Transmission System Operator of Ukraine said Friday. 

Ukraine Grid Warns Russia Moves Could Affect Europe Gas Flow

The warning coincided with the lowest flows in three weeks via Ukraine on Friday, although Gazprom PJSC said its in line with client requests. Preliminary fuel-shipment orders for Saturday also show normal flows, but those nominations may change overnight. Gazprom didn’t respond to a request for comment on the Ukrainian grid operator’s statement.  

Europe may get more LNG this year than previously expected, consultant Energy Aspects said in a note. “Covid-19 outbreaks across Asia, particularly in China, and sustained high prices for gas have eroded our outlook for Asian demand over the last month, while the supply side has remained buoyant with few unforeseen outages,” it said.

Asia’s traditional premium over Europe will return this summer, but the difference will be so small that Europe will continue pulling LNG from the U.S. for at least another year, Goldman Sachs said.

LNG WRAP: Asian Prices Fall as Russian Gas Still Comes to Region

Worries over Russia’s energy exports and the situation in Ukraine “are creating an additional layer of uncertainty underpinning prices,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “We are not close to getting an improved situation with a continued war.”

Also read: Race On to Rearm Eastern Front That May Decide Ukraine War

European Union countries on Thursday agreed to ban coal imports from Russia, the first time the bloc’s sanctions have targeted Moscow’s energy revenues. Discussions are underway on a potential oil embargo. Yet, gas has been spared for now even though some members called for tougher penalties after reports of Russian atrocities in Ukraine. 

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